OCBC expects Islamic finance boost from Budget 2013

KUCHING: In building up expectations for the upcoming Budget 2013, OCBC Bank (Malaysia) Bhd (OCBC Bank) expects the local financial sector to be in the limelight, particularly for the further development of Islamic finance.

According to OCBC Bank economist Gundy Cahyadi in an interview with The Borneo Post, this was evidenced by the introduction of the Kuala Lumpur International Financial District, now known as the Tun Razak Exchange (TRX), as proposed in Budget last year.

“Islamic banking is certainly going to be one of the key sectors the government will continue to focus on going forward,” Cahyadi outlined. “The introduction of the TRX is a clear signal that the government takes the development of its financial sector seriously.

“As it is, given that the draw of foreign talent and retaining of local talent is at the core of the Economic Transformation Programme (ETP), I think the development of the financial sector and further boosting Malaysia’s competitive edge in Islamic banking would be the cornerstone of this effort.”

Kuala Lumpur is set to be a leading global centre for international finance, trade and services with the launch of TRX at the end of July. More than RM3.5 billion worth of foreign direct investments (FDIs) is expected to flow into the country under Phase 1 of the Exchange.

“Tax incentives and rebates could be in the offing, although the TRX has also detailed certain plans along this line,” he said.

At a broader scale, Cahyadi noted that the government can be expected to continue to sustain the kind of spending pattern witnessed since late last year.

“We need to remember that we are still in the early phase of the ETP, and the government recognises the crucial need to sustain high infrastructure spending at this stage, partly to ensure a favourable environment for foreign investors who are interested to ride on Malaysia’s growth prospect,” he affirmed.

“On this front, the robust domestic economy that has been evident in the first half of 2012 would serve as an encouragement to the government that their initiatives are working rather well in ‘leading’ the private sector,” Cahyadi added.

While the country’s fiscal deficit target for 2012 was set at 4.7 per cent of gross domestic product (GDP), the OCBC Bank economist doubted that this was achievable and would more likely place it in the five to 5.2 per cent range for now.

“As for 2013, we expect the government to maintain its fiscal deficit target in the range of 4.5 to five per cent of GDP,” he concluded.

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